Lifestyle planning: How to prepare for a great retirement

Published on February 6, 2019 at 12:00 AM

John worked 50 to 60 hours per week in his own business for over 30 years. He was in his 50's and looked forward to his retirement at some stage, but as retirement comes with some major lifestyle and financial changes, he didn't know how to achieve this. So he came to us, and now he's living his very best years in retirement – you should see his golf swing!

On our advice, John was able to sell the major part of his business and by using capital gains tax concessions, was able to receive all the proceeds tax free. He then invested the bulk of the funds in a superannuation fund and draws a non-taxable pension. As a result of this John is financially secure and has no mandate to work. There's no part-time work, no “hobby” income – John can see his grandchildren once a week, and have the other six days to himself.

How did we go about lifestyle planning for John? We have a five-stage process, which makes sure we have a complete understanding of the individual and their lifestyle and financial needs.

First, we assessed John's existing lifestyle.

We then quantified his cash flow needs.

Next, we valued his business.

The next stage was to examined the tax implications of selling the business and research the tax concessions available upon retirement.

Finally, we assisted in the sale by producing a five-year analysis of his profit and loss statement excluding any income or expenses not relating to John's normal business operations.

As you can see, John's situation and experience was unique to John. As such, we needed to take a highly consultative and individualised approach to providing financial advice to John and helping him get to his ideal retirement.

Lifestyle planning is becoming a priority in our everyday lives. Nowadays, life expectancy is in the 80's, so if we retire at 65, we have another 18 years to live. While that's great from the point of view of lifestyle and giving people something substantial to look forward to after work, it also creates a big financial challenge – you're going to have to be ready to fund yourself for 18 years – if not more – without a working income.

And that's why we also recommend that people start their lifestyle planning much earlier – and indeed we've helped clients of all ages with this. What if I am only 30 years old, and have another 35 years in business? There's still plenty of lifestyle planning that you should be undertaking.

You should be assessing your existing lifestyle.

You should quantify your expected cash flow needs in retirement.

You should ensure that your business structure will allow tax concessions from your retirement should you then sell it.

You should ensure you are paying the minimum tax possible. You're going to need that money.

The important thing is to plan your lifestyle, talk to someone who can review your situation and provide a different perspective.

If you want to plan your lifestyle, contact Michael O'Brien at our office on 4396 4322.